Organizational Behavior Stephen P. Robbins & Timothy A. Judge Essentials of Organizational Behavior 13e Stephen P. Robbins & Timothy A. Judge Chapter 5 Personality and Values

Chapter 6 Perception and Individual Decision Making

After studying this chapter you should be able to: Define perception, and explain the factors that influence it. Explain attribution theory, and describe the common shortcuts used in judging others. Explain the link between perception and decision making. Contrast the rational model of decision making with bounded rationality and intuition. Identify the common decision biases or errors. Explain how individual differences and organizational constraints affect decision making. Contrast the three ethical decision criteria. Define creativity, and discuss the three-stage model of creativity.

Perception Perception: A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment The world as it is perceived is the world that is behaviorally important Perception is the way people organize the massive amounts of information they receive into patterns that give it meaning. People will use their perceptions of reality, not reality itself, to decide how to behave.

Factors Influencing Perception Situation Perceiver Target There are many factors that influence people’s perceptions. The factors are either in the perceiver, such as attitudes and experience; in the situation, such as social setting and time; or in the target, such as sounds, size, or background.

Person Perception: Attribution Theory Attribution Theory: Suggests that perceivers try to “attribute” the observed behavior to a type of cause: Internal – behavior is believed to be under the personal control of the individual External – the person is forced into the behavior by outside events/causes The attribution theory helps us to understand our perceptions about others. Research has shown that our perceptions about others are based upon the assumptions we make about them. The attribution theory says that when we observe behavior we try to determine if it is internally or externally driven. If it is internally driven it is under the person’s control whereas external causes are not under the individual’s control.

Determinants of Attribution Distinctiveness – whether an individual displays different behaviors in different situations (the uniqueness of the act) Consensus – does everyone who faces a similar situation respond in the same way as the individual did Consistency – does the person respond the same way over time We can use three factors to help us decide if behavior is internally or externally controlled: distinctiveness, consensus, consistency. Distinctiveness shows different behaviors in different situations. Consensus looks at the response and compares it to others in the same situation to see if it is consistent with the behaviors of others. Consistency looks to see if the response is the same over time.

Determination of Attribution This chart looks at the elements of the attribution theory and helps us to make the connection between external or internal driven factors.

Attribution Errors Fundamental attribution error: Tendency to underestimate the influence of external factors and overestimate that of internal factors Self-Serving Bias: Occurs when individuals overestimate their own (internal) influence on successes and overestimate the external influences on their failures The basic process of attribution applies across cultures, but Western cultures tend to be more individualist, while Asian cultures are more group oriented There are errors and biases in the attributions we make. First, we often tend to underestimate the influence of external factors and overestimate the influence of internal factors. This is called the fundamental attribution error. The next common error is the self-serving bias. This bias exists when individuals attribute their own successes to internal factors and blame external factors when they don’t have success. Culture plays a role in the attributions people make. Western cultures tend to focus on the individual, while Asian cultures are more group oriented.

Shortcuts Used in Judging Others Selective Perception: A perceptual filtering process based on interests, background, and attitude Halo Effect: Drawing a general impression based on a single characteristic Contrast Effects: Our reaction is influenced by others we have recently encountered (the context of the observation) Stereotyping: Judging someone on the basis of the perception of the group to which they belong There are some frequently used shortcuts in judging others. People will utilize past experience, their attitudes, and their interests to interpret information on their own biases, often misperceiving the situation. Judgment can also utilize the halo effect where individuals draw generally favorable impressions about an individual using a single characteristic. Contrast effects occur when we are making judgments about an individual and comparing them to other individuals we have recently encountered. Stereotyping is when we judge someone on the basis of perception of the group to which he or she belongs.

The Link Between Perception and Decision Making Decision making occurs as a reaction to a perceived problem Perception influences: Awareness that a problem exists The interpretation and evaluation of information Bias of analysis and conclusions In organizational behavior we are concerned with how decisions are made and perceptions play a significant role in that process. Often decision making occurs as a reaction to a problem or a perceived discrepancy between the way things are and they way we would like them to be. A decision is then made based on various alternatives that have been developed from the data collected. Perception influences this entire process from problem recognition to data selection to alternative chosen.

Rational Decision-Making Model Define the problem Identify the decision criteria Allocate weights to the criteria Develop the alternatives Evaluate the alternatives Select the best alternative This model is seldom actually used: it’s more of a goal than a practical method Decision making is done by individuals but occurs in organizations. There are some models that can help us in thinking through decision making in organizations. The first is the rational decision-making model. The steps are outlined in this slide. Although this is a good model it is more of a goal than a practical method.

Assumptions of the Model Complete knowledge of the situation All relevant options are known in an unbiased manner The decision maker seeks the highest utility This model assumes a perfect world in order to make decisions. It assumes that there is complete information, that every option has been identified and that there is a maximum payoff.

Bounded Rationality The limited information-processing capability of human beings makes it impossible to assimilate and understand all the information necessary to optimize People seek solutions that are satisfactory and sufficient, rather than optimal (they “satisfice”) Bounded rationality is constructing simplified models that extract the essential features from problems without capturing all their complexity The second, bounded reality, represents more of the real world where it seeks solutions that are the best given the information that is available. Basically, bounded rationality constructs simplified models that identify the essential features from problems without getting into all their complexity.

Decision Making in Bounded Rationality Simpler than rational decision making, decision making under bounded rationality is composed of three steps: Limited search for criteria and alternatives – familiar criteria and easily found alternatives Limited review of alternatives – focus on alternatives, similar to those already in effect Satisficing – selecting the first alternative that is “good enough” This slide details the three key steps in bounded rationality decision making which makes it a much more simple process than the rational decision-making model.

Intuitive Decision Making Intuitive decision making: A non- conscious process created out of distilled experience Increases with experience Can be a powerful complement to rational analysis in decision making The third model is based on intuition. This is the non-conscious process that occurs as a result of experiences that result in quick decisions.

Common Biases and Errors Overconfidence Bias As managers and employees become more knowledgeable about an issue, the less likely they are to display overconfidence Anchoring Bias A tendency to fixate on initial information and fail to adequately adjust for subsequent information Confirmation Bias Seeking out information that reaffirms our past choices and discounting information that contradicts past judgments There are many biases and errors that occur in the decision-making process. The overconfidence bias is when an individual believes too much in his own ability to make good decisions. The anchoring bias is when an individual makes decisions based on the information received first and not on the new information received. The next error often made is with the confirmation bias where, during the decision-making process, the individual uses only facts that support his decision.

Common Biases and Errors Availability Bias Basing judgments on information that is readily available Escalation of Commitment Staying with a decision even when there is clear evidence that it is wrong Risk Aversion Preferring a sure thing over a risky outcome Hindsight Bias Believing falsely that we could have predicted the outcome of an event after that outcome is already known Some additional decision-making errors include availability bias, which involves emphasizing information that is more readily at hand, information that is recent and vivid. The escalation of commitment error occurs when there is an increasing commitment to a decision in spite of evidence that it is the wrong decision. Risk aversion is when the decision maker has a tendency to prefer a sure thing over a risky outcome. The hindsight bias occurs after an outcome is already known and then believing it could have been accurately predicted beforehand.

Organizational Constraints on Decision Making Performance evaluations Reward systems Formal regulations System-imposed time constraints Historical precedents There are many organizational constraints to good decision making that create deviations from the rational model defined earlier. Managers shape their decisions on performance evaluations, reward systems, and formal regulations. They also base decisions on system-imposed time constraints and historical precedents. All these factors may influence the decisions that are made.

Ethical Frameworks for Decision Making Utilitarianism Provide the greatest good for the greatest number Rights Make decisions consistent with fundamental liberties and privileges Justice Impose and enforce rules fairly and impartially so that there is equal distribution of benefits and costs Ethics should play a role in decision making. There are three ethical criteria that influence decisions. The first is utilitarianism, where the decisions are based on the outcome of the solution. The outcome is analyzed based on seeking the greatest good for the greatest number of people and is the dominant method for businesspeople. The second criterion is rights, where decisions are based on fundamental liberties and privileges in an attempt to protect the basic rights of individuals. The final criterion is justice, where the decision imposes rules in a fair and impartial manner and equitably distributes benefits and costs.

Creativity in Organizations Creativity: The ability to produce novel and useful ideas Helps people: See problems others can’t see Better understand the problem Identify all viable alternatives Identify alternatives that aren’t readily apparent Better decisions are those that incorporate novel and useful ideas, or creativity. An organization will tend to make better decisions when creative people are involved in the process. So it is important to identify people who have that creative potential. Some of the methods and theories identified in earlier chapters can help in this process. For example, those who score high in openness to experience tend to be more creative.

Three-Stage Model of Creativity The core of the model is creative behavior, which has both causes and effects.

Creative Behavior Steps: Problem formulation: identify a problem or opportunity that requires a solution as yet unknown Information gathering: possible solutions incubate in an individual’s mind Idea generation: develop possible solutions from relevant information and knowledge Idea evaluation: evaluate potential solutions and identify the best one Creative behavior occurs in four steps, each of which leads to the next. Problem formulation, information gathering, idea generation, and idea evaluation.

Causes of Creative Behavior Cause of creative behavior: Creative potential Expertise is the single most important predictor of creative potential Creative environment Motivation Rewards and recognition If you aren’t motivated to be creative, it is unlikely you will be. Organizations need to foster the free flow of ideas. Freedom from excessive rules encourages creativity.

Creative Outcomes Creative outcomes: ideas or solutions judged to be novel and useful by relevant stakeholders Off-the-wall solutions are creative only if they help solve the problem. Creative ideas do not implement themselves; translating them into creative outcomes is a social process that requires utilizing other concepts addressed in the text.

Implications for Managers Behavior follows perception, so to influence employee behavior at work, assess how employees perceive their work. Make better decisions by recognizing perceptual biases and decision-making errors we tend to commit. Adjust your decision-making approach to the national culture you’re operating in and to the criteria your organization values. Combine rational analysis with intuition. Try to enhance your creativity.

Keep in Mind… People have inherent biases in perception and decision making Understanding those biases allows for better prediction of behavior Biases can be helpful Managers must determine when the bias may be counterproductive Creativity aids in decision making Helps to appraise, understand, and identify problems Keep in mind that individuals have inherent biases in their perceptions and corresponding decision making. These biases can be helpful if used effectively. Creativity aids in arriving at better decisions as it allows for new perspectives and ideas.

Summary Defined perception and explained the factors that influence it. Explained attribution theory, and described the common shortcuts used in judging others. Explained the link between perception and decision making. Contrasted the rational model of decision making with bounded rationality and intuition. Identified the common decision biases or errors. Explained how individual differences and organizational constraints affect decision making. Contrasted the three ethical decision criteria. Defined creativity and discussed the three-stage model of creativity.